Advances in measuring healthcare productivity
Research paper
Released 23 / 04 / 2024
Spending on healthcare has grown over the past few decades and is expected to continue to rise. Are we getting value for money? And could we be doing better?
This paper estimates productivity growth for one third of Australia’s healthcare sector and benchmarks our level of productivity against that of other countries’ healthcare sectors.
The results are positive — healthcare productivity grew at a healthy 3% per year between 2011-12 and 2017-18 and Australia’s healthcare sector was amongst the most productive in the world between 2010 and 2019.
Media release
Australia's healthcare system among the most productive in the world
New research from the Productivity Commission has found Australia's healthcare system delivers some of the best value for money of any in the world.
“Australia's healthcare spend is big and getting bigger, but we are seeing significant return on that investment through better health outcomes,” said Commissioner Catherine de Fontenay.
This is the first time that the quality of Australia’s healthcare has been considered in an assessment of productivity.
“Previous research assessed the productivity of our healthcare system by looking at how much it costs to provide a service, such as a visit to hospital. This research looks at how much it costs us to treat a particular disease and the outcomes of treatment,” Commissioner de Fontenay said.
“Looking at the outcomes our system creates for patients provides a much truer picture of its productivity. A healthcare system that gets people in and out of hospital quickly and cheaply isn't much good if those patients aren't getting better.”
Quality-adjusted multifactor productivity grew by about 3% per year between 2011-12 and 2017-18 for the subset of diseases studied, which together account for around one-third of healthcare expenditure. This growth was driven mostly by improvements in quality rather than reductions in cost.
“Productivity growth was particularly strong for the treatment of cancers, likely due to the introduction of new cancer therapies in the 2010s. This highlights the importance of quickly integrating new treatments as they emerge,” Commissioner de Fontenay said.
While these quality-driven productivity improvements are welcome, Australia’s growing healthcare bill is still cause for concern.
“Healthcare spending already accounts for 10% of GDP and this is only going to increase as our population ages. Our challenge moving forward will be to provide services more cheaply and efficiently without comprising on quality.”
The report finds that reducing our sizeable risk factors, such as obesity and alcohol consumption, is one way of enabling our healthcare sector to do more with less.
“We have the fourth highest rate of obesity among the countries we studied and the sixth highest level of alcohol consumption. This worsens population health and creates more work for our healthcare sector,” Commissioner de Fontenay said.
The report also suggests better integrating digital technology as it emerges could help contain our healthcare spend without sacrificing on the quality of care.
“Digital records, new models of remote care, and new technologies, such as AI, can make healthcare more efficient and less costly if integrated safely and effectively.”
The Commission will be exploring the transformative potential of technology adoption in healthcare in a follow-up paper to be released in coming weeks.
Media requests
Simon Kinsmore – 02 6240 3330 / media@pc.gov.au
Key points
- Contrary to prevailing views, new Commission research suggests that parts of the healthcare sector have experienced robust productivity growth in recent years.
- Quality-adjusted productivity grew by about 3% per year across the subset of diseases we studied.
- The biggest contributions to productivity growth haven’t come from doing more with less, but rather from providing more effective healthcare services.
- Quality improvements, not cost reductions, were the big drivers of productivity growth, and the vast majority of these have come from advances in saving lives.
- Not only has Australia experienced robust productivity growth, Commission research also finds that our healthcare sector is one of the world’s most productive.
- Australia’s healthcare productivity ranks third among 28 high-income countries once we account for behavioural and environmental risk factors and the age of our population.
- Australia’s relatively good performance is not grounds for complacency.
- Productivity gains have not been universal. While we have made big quality gains from advances in saving lives, we have made fewer, if any, gains in improving quality of life.
- Although welcome, quality-driven productivity improvements have done little to ease healthcare’s growing fiscal burden.
- Reducing our sizeable risk factors, such as obesity and alcohol consumption, would enable our healthcare sector to do more with less.
Contents
- Preliminaries: Cover, Copyright and publication detail, Contents and Acknowledgments
- Overview
- Key points
- We’ve spent more on healthcare, but it’s been worth it
- Australia is getting good value for its healthcare dollar relative to international counterparts
- Australia’s relatively good performance is not grounds for complacency
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1. Why measuring healthcare productivity matters
- 1.1 Why focus on improving measures of healthcare productivity?
- 1.2 What do existing measures of productivity tell us and how can they be improved?
- 1.3 What can’t improved productivity estimates tell us?
- 2. Estimating healthcare productivity growth
- 2.1 Productivity growth estimates help us understand if additional health spending has been ‘worth it’
- 2.2 Healthcare productivity growth has been robust
- 2.3 Results largely align with international and on‑the‑ground experience
- 3. Benchmarking Australia’s healthcare productivity
- 3.1 Cross‑country comparisons can highlight scope for improvement
- 3.2 Australia is getting good value for its healthcare dollar relative to its international counterparts
- Appendices
- A. Consultation
- B. Traditional approaches to estimating healthcare productivity growth
- C. How we estimated healthcare productivity growth
- D. How we estimated changes in quality of life
- E. How we benchmarked Australia’s healthcare productivity
- References
Printed copies
Printed copies of this report can be purchased from Canprint Communications.
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